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S. HRG. 113–532 

SOCIAL SECURITY: A FRESH LOOK AT 

WORKERS’ DISABILITY INSURANCE 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 24, 2014 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

RON WYDEN, Oregon, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

MARK R. WARNER, Virginia 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JOSHUA SHEINKMAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee on 

Finance .................................................................................................................. 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

WITNESSES 

Goss, Stephen C., Chief Actuary, Social Security Administration, Baltimore, 

MD ......................................................................................................................... 5 

LaCanfora, Marianna, Acting Deputy Commissioner, Office of Retirement 

and Disability Policy, Social Security Administration, Baltimore, MD ........... 8 

Vallas, Rebecca D., associate director, Poverty to Prosperity Program, Center 

for American Progress Action Fund, Washington, DC ...................................... 10 

Burkhauser, Richard V., Ph.D., professor, Cornell University, and visiting 

scholar, American Enterprise Institute, Washington, DC ................................ 12 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Burkhauser, Richard V., Ph.D.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 35 

Responses to questions from committee members ......................................... 53 

Goss, Stephen C.: 

Testimony .......................................................................................................... 5 

Prepared statement with attachment ............................................................. 58 

Responses to questions from committee members ......................................... 75 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 88 

LaCanfora, Marianna: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 90 

Responses to questions from committee members ......................................... 102 

Vallas, Rebecca D.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 139 

Responses to questions from committee members ......................................... 157 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 167 

COMMUNICATIONS

American Federation of Labor and Congress of Industrial Organizations 

(AFL–CIO) ............................................................................................................ 169 

Consortium for Citizens with Disabilities ............................................................. 171 

National Committee to Preserve Social Security and Medicare .......................... 180 

National Employment Network Association (NENA) ........................................... 183 

(1) 

SOCIAL SECURITY: A FRESH LOOK AT 

WORKERS’ DISABILITY INSURANCE 

THURSDAY, JULY 24, 2014 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 10:10 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Ron Wyden 

(chairman of the committee) presiding. 

Present: Senators Stabenow, Nelson, Cardin, Brown, Hatch, and 

Grassley. 

Also present: Democratic Staff: Jocelyn Moore, Deputy Staff Director; Tom Klouda, Senior Domestic Policy Advisor; Michael 

Evans, General Counsel; and Laura Berntsen, Senior Advisor for 

Human Resources. Republican Staff: Chris Campbell, Staff Director; Preston Rutledge, Tax Counsel; and Jeff Wrase, Chief Economist. 

OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR 

FROM OREGON, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The Finance Committee will come to order. 

Today the Finance Committee takes a fresh look at Social Security Disability Insurance, a lifeline that keeps hardworking Americans afloat in the event of catastrophic illness or disability. Obviously, America’s workforce has changed dramatically since the program began, and Social Security Disability has changed along with 

it. In recent decades, for example, more women have earned the 

protection of Disability Insurance, the baby boomer generation has 

gotten older, and the full retirement age for Social Security benefits 

has gone up. 

On a bipartisan basis, colleagues, Congress must ensure that this 

safety net is not shredded. Where there is abuse, let us find it and 

fight it. Let us all focus on the vital goal, which is updating and 

protecting this essential program for generations to come. 

Today’s hearing is about the realities of an evolving program that 

reflects changing demographics, as well as the challenges of our 

current economy. As the committee contemplates the future of Social Security Disability, as well as the rights of individuals with 

disabilities more broadly, let us address inequities that exist for 

women in both the workplace and in retirement; create better tools 

for managing chronic illness and coordinating care; and provide 

adequate agency funding to manage the program, including resources that are aimed at targeting unscrupulous doctors and lawyers. Let us prioritize access to comprehensive mental health care 

2 

at every age, and certainly encourage greater job creation for individuals with disabilities by employers. 

Fortunately, there is a substantial amount of information about 

this key program that will help to sustain it over the long term. 

First, the growth in Social Security Disability over the last 20 

years has been due to factors that the Congress expected. Policymakers, including many former members of this committee, 

planned for a fresh look at the Social Security Disability program 

in 2016, based on the shifting winds of demographics. One of those 

changes I have already mentioned: more women earning Disability 

Insurance. 

Just last week, during an important hearing in this committee, 

the Finance Committee heard testimony from Ms. Stephanie 

Dempsey. Stephanie is a 44-year-old Georgia mother, and she has 

always worked. She owned her own home and was happily married. But in her late 20s, Stephanie was diagnosed with a hereditary heart disease. The quadruple bypass surgery she had at age 

30 was just the first of several operations she has undergone to 

place 27 stents in her arteries. 

In addition to heart disease, she now suffers the disabling effects 

of lupus, arthritis, and seizure disorder. Stephanie has to take 19 

prescription drugs every day. I am looking at the witness table, because I will not forget that last week Ms. Dempsey was sitting 

where one of our witnesses is with a mountain of prescription bottles stacked up on a tray when she came before the committee. She 

takes those medicines each and every day, colleagues, and the illness has cost her her home, it has cost her her independence, and 

it has cost her her family. 

She wants to work but she cannot do it, due to her chronic illness. She worked and she earned this benefit. She was able to use 

her Social Security Disability Insurance, and, in the struggle to pay 

her bills, it has been a big help to her. It does not take care of everything, but it has made a difference. 

Stephanie is not alone. Women now make up nearly half of the 

9 million workers enrolled in Social Security Disability Insurance, 

and Social Security Disability Insurance supports about 1 million 

veterans. 

Second, I hope we will recognize that Social Security Disability 

Insurance is not a giveaway. Workers earn coverage for themselves 

and their families by working. The applicant must have a physician 

document a medical impairment that renders them unable to do 

substantial work. Less than 40 percent of applications are approved for benefits, even after appeals. 

For workers receiving Disability Insurance, it is usually more 

than half of their income. The average Social Security Disability 

benefit for a disabled worker is $1,146 a month, just above the individual poverty level. Without that benefit, half of the families receiving Social Security Disability would be in poverty in our country. 

Third, we know it is critically important to make sure disability 

benefits are going to those who need them, and that is not always 

easy. A small number of bad apples, unscrupulous doctors and lawyers, are always willing to commit fraud. But, according to the Social Security Administration’s Inspector General, the program’s 

3 

front-line employees are highly skilled at identifying when things 

are not right. In the past 6 months, they reported over 32,000 suspicious claims to the Inspector General, and the Inspector General 

found that Disability Insurance payments are more than 99 percent accurate. 

So let us, colleagues—and again, each of these areas I want to 

make bipartisan. Let us not make budgetary changes at Social Security that result in less oversight and more money lost to overpayments or fraud. That would mean fewer resources for those who 

rely on the program, which, as I have mentioned, includes women 

and their families. 

The last point I will make is, we know we have to act by 2016 

to shore up the Disability Insurance trust fund. In the past, reallocating resources within Social Security has been routine and noncontroversial. Since the disability program began, the combined tax 

rate has been reallocated—reallocated, colleagues—11 times. Some 

reallocations increased the tax rate going to the retirement trust 

fund and decreased the rate going to the Disability Insurance trust 

fund. Other reallocations did the opposite. The 1980 reforms to Social Security shifted money from Disability to the retirement program. In 1994, the Disability trust fund needed support, so policymakers decided to reallocate the tax rates to extend Social Security 

Disability and to allow for more time to collect the data that is so 

essential to the program. 

Congress now has 20 years of experience to assess how Disability 

Insurance is functioning, and maintaining this lifeline is critical. So 

I look forward to working with colleagues on both sides of the aisle 

as we take a fresh look at the program and work toward long-term 

solutions that keep the promise of Social Security’s earned benefits 

for many years to come. 

[The prepared statement of Chairman Wyden appears in the appendix.] 

The CHAIRMAN. Senator Hatch, thank you. I look forward to 

working closely with you on these issues. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, vice versa. Thank you, Mr. Chairman, for 

holding today’s hearing. This is an important topic that deserves 

our immediate attention. 

In 2013, the Social Security Disability Insurance, or DI program, 

provided over $140 billion in benefit payments to nearly 11 million 

disabled workers and dependents. According to CBO, the number 

of DI beneficiaries increased nearly 6-fold between 1970 and 2012, 

and, over the past 40 years or so, outlays for benefits have grown 

by more than 9 times. There are various reasons for the growth, 

including demographics, changes in the composition of the workforce, relaxation of benefit eligibility criteria, and others. 

Now, I hope that we can begin to explore these areas today. 

DI benefits are funded from payroll tax receipts and assets in the 

DI trust fund, which are projected to be exhausted sometime 

around 2016. At that point, under current law there will be abrupt 

across-the-board benefit cuts of around 20 percent. No one wants 

4 

that to happen, which is one reason why we are here today to begin 

responsibly looking at the DI program. 

Indeed, it is our responsibility to fully examine this system and 

work to improve it and its finances where we can. Some believe 

that we could solve all or most of the financial challenges facing 

the DI program, and Social Security in general, through higher 

taxes. I made several requests to the Congressional Budget Office 

regarding this strategy, and recent analysis performed in response 

to those requests shows how difficult this approach can be. 

Most proposals to reform Social Security by raising payroll taxes 

would result in massive tax increases, particularly on middle-class 

Americans, negatively impacting job growth and harming middleincome families. That is hardly what our economy needs. 

I think there is definitely more we can do on the program integrity side. While I am not sure that the DI program is rife with 

fraud, we should work to prevent whatever instances of fraud we 

can. While I do not think that administrative law judges in the DI 

program who hear decision appeals cases are all bad actors, each 

erroneous decision can cost the trust fund hundreds of thousands 

of dollars. That being the case, we need to protect against frivolous 

decision-making that can quickly add up to billions of dollars in improper DI benefit payments. 

Sadly, the Obama administration’s approach to DI and Social Security in general has largely been to remain silent, even in the face 

of the impending DI trust fund exhaustion. The only major structural change that the administration briefly considered was adoption of the chained CPI and government-wide price indexation, coupled with benefit enhancements for vulnerable populations. However, the President has since withdrawn even that modest proposal 

and has publicly stated that he would not even discuss the idea unless he was assured of getting yet another tax hike to go along with 

it. 

Now, Mr. Chairman, I come to today’s hearing in the interest of 

having us responsibly examine the DI program to see what can be 

done and what we can agree upon to help improve the program and 

its finances for today’s beneficiaries and, of course, future generations. I also believe that it would be irresponsible to simply take 

the expedient route of agreeing at this time to merely rubber stamp 

a payroll tax reallocation without examining the DI program to see 

what could be changed, what innovations could be considered, and 

what could be done in the face of projected trust fund exhaustion 

and over $23 trillion in unfunded obligations in the Social Security 

system. 

It is premature to agree on some payroll tax reallocation as a 

patch of convenience and to kick the can down the road yet again. 

Now, I am willing to work with you, Mr. Chairman, and anyone in 

Congress, to see what we can do before DI trust fund exhaustion 

in 2016. There are many options that we already know about, but 

we can also examine more innovative ideas. For example, it could 

be worth looking at pay-for-success funding models to help fund 

one of the DI proposals in the President’s budget. I am also willing 

to see if there are ways to improve funding flows for Continuing 

Disability Reviews in the DI program, another concept found in the 

President’s budget. 

5 

In the end, it seems to me that we have two paths to choose 

from. One is what I have just traced out involving inquiry, research, and examination of what we can do to enhance the DI program and its finances and what we can agree upon. The other is 

to engage in divisive political rhetoric and demagogue the issue 

even further, which is irresponsible, in my view, and not what disabled American workers, and all workers ensured by Disability Insurance, should tolerate. 

As I have tried to make clear, my preference is for the first path 

of cooperation, bipartisanship, and responsibility. I hope that, in 

the end, that is the path we will take. 

So I want to thank you again, Mr. Chairman, for agreeing to hold 

today’s hearing. 

The CHAIRMAN. Thank you, Senator Hatch. I think, as you and 

I have talked—and I always enjoy our weekly sessions—we are 

going to work very closely on these issues, and others. I just want 

colleagues, as we start this debate, to remember Stephanie Dempsey sitting at that table there, because she did everything right, 

and she just got walloped with every possible illness. She came before the U.S. Senate with all those medications stacked up on the 

witness table and was just hoping, hoping that we would come up 

with policies that would work for her. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. So we are going to all work together. We have 

a terrific panel here today. Let me just introduce them. 

Our first witness will be Mr. Stephen Goss. He is the Chief Actuary at the Social Security Administration. Our next witness will be 

Ms. Marianna LaCanfora—I hope I am pronouncing that correctly—Acting Deputy Commissioner, Office of Retirement and Disability Policy at Social Security. Our third witness will be Ms. Rebecca Vallas, who is associate director of the Poverty to Prosperity 

Program at the Center for American Progress. Our final witness 

will be Dr. Richard Burkhauser, who is a professor at Cornell University and an adjunct scholar at the American Enterprise Institute. 

We thank all of you for coming. It is our custom here at the Finance Committee to make your prepared statements a part of the 

hearing record, and, if you could take your 5 minutes or so to summarize, that would be very helpful. This is a topic that I know my 

colleagues are very interested in exploring with you, so let us go 

with you to start, Mr. Goss. 

STATEMENT OF STEPHEN C. GOSS, CHIEF ACTUARY, 

SOCIAL SECURITY ADMINISTRATION, BALTIMORE, MD 

Mr. GOSS. Chairman Wyden, Ranking Member Hatch, members 

of the committee, thank you very much for the chance to talk to 

you today. I hope this will not be a debate, at least from this panel, 

because we have some facts to share with you. 

I would like to walk you through a few of the figures that I have 

in the written testimony and just tell you a few things to help 

elaborate on the points made there. First of all, let me just mention, by the way, in addition to the 9 million disabled worker beneficiaries we have under the DI program—which is the one that has 

6 

the trust fund that is looking towards possible reserve depletion at 

the end of 2016—we have 155 million American workers and their 

families who are insured against the possibility of becoming disabled and receiving those benefits. 

So it is for more than just those who are receiving benefits; it actually provides insurance protection for virtually all the workers in 

our economy. So on our first slide that we have here, we have just 

a little picture. Some of you have seen this before. What this really 

does is, to the left of the black vertical line, it shows what the cost 

as a percentage of GDP was for the DI program and how it has 

risen, especially from around 1990 to 2010, for reasons that I will 

try to explain here in just a moment. But it also shows that, going 

forward, we project that, in fact, the cost of the DI program will 

be essentially leveling off, again for reasons I will try to explain 

here in a moment. 

The critical point about this is that, under current law, the 

scheduled level of revenue or income for the program is a little bit 

less than what is scheduled for the cost of the program, and that 

is really the problem that you all have to try to address. As an actuary, I can only just sort of tell you what we are facing, but we 

depend on you all to make the decisions about how to move forward. 

So, on our next slide we actually show what really has fundamentally caused this issue. Senator Wyden expressed this very 

well; I could not do it any better. But let me just share with you 

a little further thought. This slide shows you, as we march from 

1940 out to today and into the far future, the distribution of our 

adult population by age groups. 

What is critical here is, if you see the center line, the center line 

shows you the percentage of our adult population that is of working 

age; the amount of the distance below, that is our working-age population. The amount that is below the bottom line is the amount 

of young adults of working age. So the age for disabled worker 

beneficiaries falls between the center and bottom lines. 

You can see between 1970 and 1990 that the distance between 

the center and bottom lines, which is the age group of age 45 to 

64—that is the older adult working-age population, the folks who 

are most likely to become disabled—was shrinking. Those are the 

good times. Now, the not-so-good times were when the baby 

boomers were moving into that age bracket between 1990 and 

2010. That is when we had the big run-up in disability costs. That 

is the principal problem, and there are other problems we will talk 

about in a moment. 

The good news is that, as we move into the future, that share 

of our adult population and working-age population will stabilize 

and even decline for the disability ages, so we will indeed have a 

stabilization, even a reduction, in the cost of disability. The bad 

news is that, of course, those baby boomers are going where? They 

are going to go above 65, and they are going to become retirees. So 

to deny that we will have a stabilization of the growth rate in the 

disability program would be to deny that we will have the increase 

in the retirement age. They go together. 

On the next slide, I wanted to share with you also, just by way 

of talking a little bit about this, the increase that we have foreseen. 

7 

If we go back to the 1995 trustees’ report—which is an important 

one, because that was the trustees’ report that came out right after 

the last major legislation for disability, when we had that reallocation which saved the trust funds from depleting—you can see that, 

compared with what we actually had predicted, in 1995, 2000, and 

2005, the projected level of cost as a percentage of GDP for the DI 

program has actually turned out, on the right-hand bars, to be 

lower than we were projecting in the 1995 trustees’ report. 

Now, for 2010 and 2015, we had this unfortunate recession occur, 

quite a severe one, that caused the right-hand bars to be higher, 

which is the actual cost of Social Security Disability Insurance in 

2010, and we expect in 2015 it will be a little bit higher than we 

had projected in 1995. Why? We were not expecting a big recession 

back in 1995 for that period. 

Going forward, just going back to the trends that we have—demographics and disability—we expect that, again, we will have 

costs that are lower in the future than we had been projecting back 

in 1995. 

On the next slide—I do not have a lot of time, so I do not want 

to spend a lot of time on this particular slide—this really just 

shows the relationship between the changing unemployment rates, 

the economy, and the incidence rates of disability. 

The next slide also gives you a little bit different look at that, 

because we have also done some work showing the effect of the 

changing unemployment rates and the state of the economy on the 

allowance rate for disability beneficiaries. It is true that, when we 

have a major recession, we tend to have more people apply for benefits, but the percentage of them who are actually allowed goes 

down. 

On our next little picture here we have something that explores 

a little bit more what actually happened in this recession. In this 

recession, the cost as a percentage of GDP, as indicated earlier, did 

go up. But why was that? It is mainly because the reduction in 

GDP itself far exceeded the percentage increase in the cost of disability benefits. 

The next slide even more graphically illustrates this. The righthand bars on the next slide show you the number change, that is 

the reduced numbers of workers we had in our economy as a result 

of the recession, versus the short left-hand bars, which show the 

increase in the number of disabled worker beneficiaries. The reduction of the workforce was much higher in the recession than the 

increase in beneficiaries, and that is really why our cost as a percentage of GDP has temporarily gone up. 

So, when we go to this next slide, we can see what we have seen 

before. Back in 1995, we were projecting that the trust fund reserves would deplete in 2016, as Senator Wyden said. We had this 

wonderful period from 1995 to 2005. Some might recall it being referred to as the New Economy, when people thought great productivity would go on forever. That did go on forever. As a result of 

that, the projections our trustees made did get a little bit more optimistic. This late recession has brought us back to reality, and we 

are back to 2016. 

I am almost at the end here. This next slide gives you something 

that some have seen before, but it just gives a breakdown of the 

8 

increase between 1980 and 2010, over that 30-year period, where 

we had almost a tripling in the number of disabled worker beneficiaries. But we show, if you move from left to right, that was 

largely because of the increase in the general population of working 

age and the change in the age distribution. On the next slide, another item that Senator Wyden—— 

The CHAIRMAN. If you would not mind, Mr. Goss—and I am very 

interested in your testimony—I just know you are a little bit over 

your time. 

Mr. GOSS. Oh. All right. 

The CHAIRMAN. I want to be sensitive to my colleagues. 

Mr. GOSS. All right. If I can just go to what is really the nextto-the-last slide just for one really quick item—and this is really 

what we are facing. What we are facing is the reserve depletion 

coming up at the end of 2016. We depend on you all to come up 

with something. On the very last slide we do have something that 

was included in the testimony. It is one possibility for keeping the 

benefits whole going forward, which is a tax rate reallocation, 

much as we did in 1994 and many times before. 

Thank you very much. I wish we had more time. 

The CHAIRMAN. Great. Well, I know you are going to get many 

questions from Senators. 

Mr. GOSS. Oh. All right. I hope so. 

[The prepared statement of Mr. Goss appears in the appendix.] 

The CHAIRMAN. And now let us go to Ms. LaCanfora. 

STATEMENT OF MARIANNA LaCANFORA, ACTING DEPUTY 

COMMISSIONER, OFFICE OF RETIREMENT AND DISABILITY 

POLICY, SOCIAL SECURITY ADMINISTRATION, BALTIMORE, 

MD 

Ms. LACANFORA. Chairman Wyden, Ranking Member Hatch, 

members of the committee, thank you for inviting me to discuss the 

Social Security Disability Insurance program. I am Marianna 

LaCanfora, Social Security’s Acting Deputy Commissioner for Retirement and Disability Policy. 

The DI program provides benefits to disabled workers and their 

dependents. Workers become insured under the program based on 

their contributions to the Disability trust fund. For this reason, the 

DI benefit is rightfully described as an earned benefit. 

When we decide whether a person qualifies for DI benefits, we 

are required to follow the definition of disability that Congress included in the Social Security Act. The Act generally defines disability as the inability to engage in any work—substantial gainful 

activity—due to a medically determinable physical or mental impairment that has lasted, or is expected to last, for at least 1 year 

or to result in death. This is a very strict standard of disability, 

and most people do not meet it. 

In fact, while 57 million Americans report living with disabilities, 

only 14 million disabled individuals receive our benefits. This includes more than 1 million veterans. To apply the statutory definition of disability, we do a rigorous, structured analysis of each case 

using a 5-step sequential evaluation process. At step one, we determine whether a person is working and engaging in substantial 

gainful activity. If so, we deny that claim. 

9 

At step two, we assess the existence and severity of a person’s 

impairment, using objective medical evidence. If we do not find a 

severe impairment, we deny the claim. 

At step three, we determine whether the severe impairment 

matches the criteria of a listing. The listings describe, for each 

major body system, the impairments considered so debilitating that 

they would reasonably prevent someone from working. If a person 

has a listing level ‘‘severe’’ impairment, we allow that claim. If not, 

we proceed to step four. 

At step four, we consider, in light of a person’s impairment, 

whether that person can do any work that they have successfully 

done before. If so, we deny that claim. 

At step five, we also consider an individual’s age, education, and 

work experience, and determine whether they can do work that exists in the national economy. If they can, we deny the claim. If they 

cannot do any work that exists in the national economy in significant numbers, we will allow that claim. 

Our partners at State agencies, called the Disability Determination Services, make initial disability decisions. They also reconsider 

the decisions of denied claimants when they appeal. Persons denied 

benefits by the DDS can request a hearing before a Federal administrative law judge, and thereafter they also have the right to appeal to our appeals council and then in Federal district court. 

Without question, administering the Social Security Disability 

program is a uniquely complex and challenging task. Our goal is 

to keep pace with medicine, science, technology, and the world of 

work. We consult with the foremost experts and have partnerships 

across government. 

Currently, we are collaborating with the National Academy of 

Science’s Institute of Medicine to update all of our disability rules 

with the most current medical science. We are also collaborating 

with the Department of Labor to update all of our occupational information, and we are collaborating with the Retirement and Disability Research Consortium to build an evidentiary base for potential policy improvements. 

In recent years, deep budgetary cuts have made administering 

the Disability program more difficult. In fact, for the last 3 years 

prior to 2014, our agency received an average of nearly $1 billion 

less than the President requested for our administrative budget, including our program integrity work. We lost about 11,000 employees over that 3-year period. That level of chronic under-funding 

caused service degradation and increased our backlogs. 

While our budget level in fiscal 2014 meets our needs more adequately than in prior years, it is insufficient to make up for all the 

losses in those prior years. We still have significantly fewer employees than we had in fiscal year 2010, our workloads remain 

high, and we must make difficult trade-offs as we balance service 

with our program integrity work. 

Sustained and adequate funding is critical. The fiscal year 2015 

President’s budget would allow us to better balance our important 

service and program integrity efforts. We need your support of the 

President’s budget to meet our obligations to the public we serve. 

Thank you for the opportunity to be before you today. I would be 

happy to answer any questions. 

10 

The CHAIRMAN. Thank you very much. 

[The prepared statement of Ms. LaCanfora appears in the appendix.] 

The CHAIRMAN. We welcome, now, Ms. Vallas. Welcome. 

STATEMENT OF REBECCA D. VALLAS, ASSOCIATE DIRECTOR, 

POVERTY TO PROSPERITY PROGRAM, CENTER FOR AMERICAN PROGRESS ACTION FUND, WASHINGTON, DC 

Ms. VALLAS. Thank you, Chairman Wyden, Ranking Member 

Hatch, and members of the committee. My name is Rebecca Vallas, 

and I am the associate director of the Poverty to Prosperity Program at the Center for American Progress. 

The subject of today’s discussion is of the utmost importance to 

all of us as Americans, because any of us could find ourselves in 

the position of needing to turn to Disability Insurance at any time. 

Imagine that tomorrow you are cleaning out your gutters, you 

fall off a ladder, and you suffer a traumatic brain injury and spinal 

cord damage, leaving you paralyzed and unable to speak. Unable 

to work for the foreseeable future, you have no idea how you are 

possibly going to support your family. 

Now, imagine your relief when you realize an insurance policy 

that you have been paying into your entire working life will be 

there for you and help keep you and your family afloat. That insurance policy is Social Security. I am sure we can all agree that no 

one wants to see this important program weakened or its basic but 

crucial benefits cut. 

In fact, the American people have made clear, time and again, 

that they are strongly supportive of Social Security and strongly 

opposed to benefit cuts. Indeed, recent polling by Pew found that 

that was just about the only thing Americans could agree on. I look 

forward to discussing how we can work together to strengthen this 

vital program so that it can continue to protect American men, 

women, and children for decades to come. 

I will make three main points today. First, Social Security Disability Insurance, or DI, provides basic but essential protection that 

workers earn during their working years. Social Security protects 

more than nine in 10 American workers and their families in case 

of life-changing disability or illness. 

As Marianna noted, DI is coverage that workers earn. With every 

hard-earned paycheck, American workers pay into the system 

through payroll tax contributions which serve more or less as insurance premiums. DI, thus, provides insurance that is otherwise 

out of reach for most families. Just one in three private-sector 

workers has employer-provided long-term disability insurance, and 

those plans are often far less adequate than Social Security. Coverage is especially scarce for low-wage workers, so in effect Social 

Security corrects for a market failure, ensuring that American 

workers and their families have basic but essential insurance that 

most of us could never afford on the private market. 

As the chairman noted, DI benefits are incredibly modest, but 

they are incredibly vital to American workers and their families. 

For more than 80 percent, DI is their main or sole source of income, and benefits are so modest that nearly one in five disabled 

worker beneficiaries lives in poverty, but, without DI, more than 

11 

half would be poor. Disabled workers use DI for basic needs such 

as paying their rent, paying their mortgage, affording food, affording co-pays on needed, often life-sustaining medications. Without 

Social Security, the alternatives for many would be unthinkable. 

My second main point today is that Social Security’s eligibility 

criteria are stringent, and only workers with the most severe disabilities and illnesses qualify for benefits. I will not repeat the definition of disability which Marianna so ably explained, but I will 

point out that what the definition of disability requires is that a 

worker not only be unable to do his or her past jobs, but also any 

other job in the national economy at a level where he or she could 

earn even $270 per week. 

According to the OECD, comparing our DI program to other industrialized nations, we have one of the strictest disability standards in the entire industrialized world, and the majority of applicants are denied under this strict standard. Many are terminally 

ill. Thousands die each year waiting for their needed benefits, and 

nearly one in five beneficiaries dies within 5 years of receiving benefits. 

Third and finally, it is no surprise that action will soon be needed to address the program’s finances. As Chief Actuary Goss pointed out, the 1995 trustees’ report provided ample warning of DI’s reserve depletion in 2016, and the program’s finances have been on 

a predictable path ever since. 

Unfortunately, a great deal of misinformation has been proffered 

about this vital program, and I am sure we can all agree that this 

misinformation does not serve an honest debate. The reasons for 

the program’s period of rapid growth, which the Chief Actuary 

noted has now come to an end, are well-understood and are chiefly 

demographic. The growth was not a surprise, nor does it indicate 

that the program is anything but working as intended. 

Fortunately, as the chairman noted, a simple, routine step that 

Congress has taken nearly a dozen times in the program’s history, 

in a bipartisan manner on every occasion, would put DI and the 

entire Social Security system on sound financial footing for the 

next 2 decades. It is called reallocation, and it has occurred no less 

than 11 times, about equally in both directions. The last time reallocation was done in 1994, it was enacted by a unanimous vote 

in both the House and Senate, receiving the bipartisan support of 

several Senators who serve on this committee today. 

In closing, I would like to borrow the words of Robert Ball, who 

served as Commissioner of Social Security under Presidents Kennedy, Johnson, and Nixon. Commissioner Ball noted, ‘‘I see little 

merit in doing anything less than financing Old-Age and Survivors 

Insurance and Disability Insurance on approximately equal terms.’’ 

The most important point, of course, is to maintain confidence in 

the Social Security system as a whole. When it comes to Social Security, the will of the American people is clear: they value and support this program and, indeed, want to see it strengthened. Policymakers have many options to ensure long-term solvency of the 

overall system and a window of 20 years to arrive at a package 

that will accomplish that goal. 

In the meantime, policymakers should take the common-sense 

step of enacting a simple payroll tax reallocation, as has been done 

12 

11 times in the past, to keep DI on sound footing past 2016. Failure to do so would be not only unprecedented, but also nothing 

short of devastating to millions of disabled workers and their families. 

I would be happy to take any questions that you have, and thank 

you. 

The CHAIRMAN. Thank you very much, Ms. Vallas. 

[The prepared statement of Ms. Vallas appears in the appendix.] 

The CHAIRMAN. Dr. Richard Burkhauser, we are glad to have 

you. Please proceed. 

STATEMENT OF RICHARD V. BURKHAUSER, Ph.D., PROFESSOR, 

CORNELL UNIVERSITY, AND VISITING SCHOLAR, AMERICAN 

ENTERPRISE INSTITUTE, WASHINGTON, DC 

Dr. BURKHAUSER. Thank you, Senators. I love to solve problems, 

and one of the wonderful things about my life is that Cornell University now pays me an enormous amount of money to solve the 

problems that I choose to solve. 

If you want to take a fresh look at what is going on with SSDI, 

I think you have to answer and solve these two puzzles. First is, 

what accounts for the growth in the prevalence rate of SSDI recipients as part of the working-age population? Second is, will this 

growth continue into the future? We have heard some discussion 

about this already. 

I certainly agree with the previous speakers that increasing the 

retirement age is important, the aging of the population is important, and women’s labor force growth is important. But Mary Daly 

at the San Francisco Federal Reserve Bank and Jon Schwabish at 

the CBO, as well as David Autor at Harvard and Mark Duggan at 

Stanford, using shift/share analysis in separate research papers, 

argue that while these one-time factors are important, they only 

explain part of the growth in SSDI prevalence rates. As can be 

seen in slide 1, Daly and Schwabish find that only about 56 percent 

of this growth since 1980 is explained by these factors. 

The factors that account for the other 44 percent have not been 

discussed by the other members of the panel, and they are critical. 

What is driving that 44 percent? Well, in my view, it is public policy changes that have eased entry into the system: relaxation of 

entry rules through changes in mental illness criteria; the use of 

back pain, making it more difficult for CDRs to remove people who 

are able to work; and, more importantly, the way that Social Security gatekeepers have used these rules in their decision-making. 

In a 2013 American Economic Review article, Nicole Maestas and 

her co-authors, one a researcher from the Social Security Administration, found that, in 23 percent of all cases heard by DDS folks, 

the decision was based on the luck-of-the-draw of whether the applicant got a hard or easy evaluator. The problem is that it is increasingly difficult to make these hard decisions on medical criteria 

alone. In more than 50 percent of these cases, the decision has to 

be made on vocational criteria. 

So, having said that, if you look at the next slide, what the Office 

of the Chief Actuary has nicely done—and these numbers are available on the SSA website—is show us what history has told us, that 

between 1977 and 2013 there was a rapid rise in the number of 

13 

people on the rolls. Look especially at the period between 1992, 

where it was 3.47 million, to 2012, where it was 8.83 million. 

More boldly, the Chief Actuary has told us that this growth is 

going to substantially decrease. As a matter of fact, after 2025, it 

is going to stabilize and not increase at all. I hope that is the case. 

But the work of Daly and Schwabish and of Autor and Duggan suggests otherwise. Daly, Duggan, and I were each members of outside 

panels asked to evaluate the Chief Actuary’s methods and assumptions over the last dozen years, so we have talked to him about his 

predictions over the years. 

The next slide will show you why I am doubtful that the Chief 

Actuary’s predictions will come true. This is a history of the Office 

of the Chief Actuary’s predictions over the last 25 years about 

growth in SSDI prevalence rates, the very predictions that he is 

making today. What we see in the black line is the actual increases. In 1988, he predicted that growth would not be very great, 

and he was wrong. In 1991, he predicted growth was not going to 

be very great, and he was wrong. In 1996, he actually predicted 

growth that was greater than what happened over the next few 

years. This is the projection he is now arguing is the one that got 

it right, if you extend it out to 2013. But in 2001, he predicted that 

it was going to be less than that, and in 2005 he also predicted that 

it was going to be less than that. And these predictions were 

wrong. 

What is going on here? Why is it so hard for him to predict the 

future? Well, because it is hard for anyone to predict the future. 

But it is also because, in his predictions of the future, he has not 

taken into consideration in a systematic way the 44 percent of 

growth that is accounted for by changes in the SSDI program itself. 

Policy changes matter. 

So let us go to the next slide. What I am urging you to do—and 

what I am urging the Social Security Administration to do—is to 

put a band around possible future growth increases. The top line 

shows you what would happen to growth if it simply increased at 

the same rate it has been increasing since 1980. We see substantial 

growth much above the growth that is predicted by the Chief Actuary. 

Why does this matter? It matters because, if you really believe 

that these are once-and-done changes in the increase in the SSDI 

rolls, then a once-and-done, one-time single increase in SSDI taxes 

will match long-term revenues to long-term expenditures. But, if 

that is not the case, there will be continuous growth in prevalence 

rates, and this one-time tax increase will only be a down payment 

on the future growth in expenditures. In that case, we need to 

think more carefully about structural changes that will slow down 

this future growth. 

Thank you. 

The CHAIRMAN. Thank you very much, Doctor. I know we are 

going to have a good discussion with colleagues on both sides. 

[The prepared statement of Dr. Burkhauser appears in the appendix.] 

The CHAIRMAN. Ms. LaCanfora, let me start with you. Back as 

a young guy, I ran the Senior Citizens Law Service and Gray Panthers. We followed these programs very carefully. I particularly 

14 

looked at this question of whether it was somehow easy to get 

these benefits, and I have tried to follow this over the years. 

I was struck, in preparing for the hearing, by a Los Angeles 

Times article, specifically a comment by a Jerry Mashaw, who is 

an authority on these issues at Yale Law School. He said something that really struck me. I am curious. You have been in the 

field for years and years—I gather decades—and I would be curious 

if you think this is generally true. 

Mr. Mashaw from Yale Law School said, ‘‘It is unlikely that 

someone able to work will voluntarily opt instead for disability benefits that pay, on average, one-third of the mean wage, require a 

6-month waiting period for application, a 2-year waiting period for 

medical benefits, and provide any benefit to fewer than one-half of 

those who apply.’’ 

Just as a general proposition—and you may not have heard of 

this or this particular gentleman—is that pretty much accurate, in 

your view, given your years in the field? 

Ms. LACANFORA. That does reflect my experience. I started my 

career taking claims from the very disabled individuals whom we 

are talking about, and I spent years doing that, so I have run into 

these folks personally. I think generally people want to work, and 

they come to us as a last resort. 

The CHAIRMAN. Let me walk through some of the other matters 

that relate to exactly what you have to do to earn this benefit. My 

understanding is that an individual has to work a quarter of their 

adult life and 5 of the last 10 years. Is that generally accurate? 

Ms. LACANFORA. That is a generally accurate summary of what 

it takes to become insured for these disability benefits, yes. 

The CHAIRMAN. And I think you heard me talk earlier about— 

and she is going to sort of be the face of my focus on this program—Ms. Dempsey, who was here, Stephanie Dempsey, and the 

link between this and chronic illness, about which we already have 

a bipartisan bill in this committee and in the House as well. 

My understanding is that, in many instances, we are talking 

about individuals who are chronically ill, and, in order to qualify, 

an individual has to be unable to engage in substantial gainful activity by reason of a medically determinable physical or mental impairment expected to last at least a year or result in death. Is that 

essentially the link between the program and chronic illness? 

Ms. LACANFORA. Exactly. And I would just add, in terms of 

chronic illness, when we do terminate benefits for individuals 

based on medical Continuing Disability Reviews, we see about a 

fifth of those folks come back onto the disability rolls within 8 

years of being terminated, which just further, I think, makes your 

point that a lot of these folks have chronic illnesses. 

The CHAIRMAN. And the last point dealt with this matter of applications being approved. What the staff informed me is that last 

year well over half—I mean, it is something like 40 percent—of the 

applications were actually approved after you got through the various levels of appeal. Is that correct? 

Ms. LACANFORA. That is correct. I would also add that, right 

now, our allowance rate is the lowest that it has been in decades. 

The CHAIRMAN. Let me ask just one other question, if I might, 

because colleagues have a great interest in this, and that is on the 

15 

work activity of those in the disability program. From the seat of 

your pants you say, all right, these are modest benefits, benefits, 

as I understand it, that are lower than the minimum wage, so 

there certainly would be a substantial number of people who would 

work if they could. So, if you could, comment on the work capacity, 

the ability of those on disability to work. 

Ms. LACANFORA. What we see is that about 28 percent of our 

beneficiaries on the DI rolls have some level of earnings, but only 

10 percent actually exceed what we call the trial work period level, 

which is a very minimal level of earnings below the poverty level. 

In terms of people who actually leave the disability rolls due to 

work, they represent less than 1 percent of all individuals. So, 

while we see people attempting to work, what we see is that, because of chronic illnesses and other debilitating conditions, work 

becomes sporadic, and folks have an inability of sustaining that 

work over a reasonable period of time. 

The CHAIRMAN. I am essentially out of time, but let me just wrap 

up, if I might, with this. Give us, given your years in the field, your 

assessment of employers hiring individuals with disabilities. I 

would be interested in your experience. Are employers readily 

available who want to hire individuals with disabilities in our 

country? 

Ms. LACANFORA. I think we have a tremendous amount of work 

to do in that arena. Recently, the Department of Labor promulgated regulations under section 503 that require Federal contractors to hire people with disabilities, and that is certainly a step in 

the right direction. 

I think there are other things we can do. But our experience is 

that people struggle, truly struggle, to find jobs, particularly when 

they have lower levels of education and less skill in the workplace. 

It is very difficult to sustain work and to find work in this country. 

The CHAIRMAN. Very good. 

Let us go now to Senator Hatch. I am over my time. 

Senator HATCH. Well, thank you, Mr. Chairman. 

The Office of the Actuary highlights many reasons why demographics help to explain some of the changes over time in benefits 

and benefit growth in DI and on the retirement side of Social Security. It also mentions some other factors, one of which is changes 

in policy. Now, regarding those changes, the Congressional Budget 

Office has identified that the ways in which people could qualify for 

the DI program were expanded by legislation in the early 1980s. 

According to CBO, that legislation ‘‘allowed symptoms of mental 

illness and pain to be considered in assessing whether a person 

qualified for admission to the DI program, even in the absence of 

a clear-cut medical diagnosis.’’ 

Now, the CBO also says that, ‘‘The easing of the eligibility criteria increased the importance of subjective evaluations in determining whether applicants qualified for benefits.’’ CBO also says 

that, ‘‘Those changes in policy led to a substantial expansion in the 

share of DI beneficiaries with mental or musculoskeletal disorders.’’ 

Now, my question for all of you panelists is whether you agree 

with what CBO has to say and, if so, whether that points to a need 

to carefully examine how the DI program treats sometimes subjecVerDate Mar 15 2010 14:11 Feb 13, 2015 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 R:\DOCS\92646.000 TIMD
16 

tive evaluation of claims that include symptoms of mental or musculoskeletal disorders. Yes, sir? 

Mr. GOSS. If I may, thank you very much, Senator Hatch. Those 

are great questions. There are two little pictures that are on pages 

8 and 9 of my written testimony that we did not actually get to, 

but I would like to just tell you about those a bit. We actually do 

monitor and we do pay attention to, for instance, the percentage of 

newly entitled disabled worker beneficiaries who have impairments 

of different types. 

On those graphs you will see, on pages 8 and 9, that, if we look 

at younger people, younger new disabled worker beneficiaries aged 

30 to 39, women in particular, the percentage of the new entitlements that came on our rolls with a mental impairment has not 

changed from the early 1980s through 2010. So it simply has not 

changed. We should talk further with Doug Elmendorf and folks at 

CBO. 

If you look at the second one, which is for people coming newly 

on our rolls at ages 50 to 59, the share of those coming on with 

a mental impairment is much, much smaller at the older ages, and 

that also has not changed over the last 30 years. So, I think we 

need some more conversation on this. 

The one point that really is important—and you will see that on 

the slide on page 9—is that the share of all the new disabled worker entitlements coming on the rolls at age 50 to 59, men and 

women alike, who have musculoskeletal impairments has risen, but 

interestingly, at exactly the same time, the number of people coming on the rolls with cardiovascular impairments has decreased. 

Between the two of those, they have maintained exactly the same 

share over that time. 

So there is much more to look at here, but the mental impairment issue, the share age-by-age for men and women who have 

been coming on with mental impairments, really has not changed 

over the last 30 years. 

Ms. LACANFORA. I would like to just—oh, I am sorry. 

Senator HATCH. No, go ahead. You go ahead, and then Dr. 

Burkhauser. 

Ms. LACANFORA. I would like to just briefly add, we do not award 

benefits to people solely based on allegations of pain. We do not. 

As I said in my opening remarks, a person must have a medically 

determinable impairment based on objective medical evidence from 

a medical provider, so we do not adjudicate claims based on pain 

or symptoms reported by claimants. 

We do consider allegations of pain, and we look at them in terms 

of all of the medical evidence that we get, and we look for consistency and credibility in the evidence, but we do not pay benefits 

based on pain alone. 

I also want to say that we do not diagnose people with impairments; we follow the medicine. We look for the evidence that has 

been crafted over a person’s medical longitudinal history, and we 

use that evidence to award or deny benefits, but we are not making 

diagnoses at the Social Security Administration. 

Senator HATCH. I was just quoting CBO, so I just wanted to see 

what you had to say. 

Dr. Burkhauser? 

17 

Dr. BURKHAUSER. So I think CBO is following the economic research on this issue. We certainly know that in the 1980s there 

was a change in the criteria for evaluating mental illness, and we 

know that the share of people coming onto the roles with that as 

their primary condition has risen substantially. We also know that 

the prevalence rate of people on the disability rolls under age 40 

has been rising faster than older people, and in large part that is 

because of persons with a mental illness as their primary diagnoses. 

In addition, Autor and Duggan, in their work, agree that for the 

average wage worker, SSDI benefits do not replace a large share 

of that worker’s average yearly wage earnings. But for lower-wage 

workers, that replacement rate has been rising over time. They 

find empirical evidence that this increase has had some effect on 

the decision of low-wage workers to try to get onto the SSDI program. 

Now, I am not talking about fraud or abuse here. That is not the 

issue. The issue is that we are increasingly putting a burden on 

our DDS people to make very difficult decisions about who—on an 

unclear borderline—gets on the program and who does not. 

Maestas found that 23 percent of those people who apply get on 

the rolls by the luck of having either a harsh evaluator or an easy 

evaluator. But more importantly, she found that those people who 

do not get on the rolls, if you follow what happens to them afterwards, work more than the people who did get on the rolls. So that 

is clear evidence of a program effect that is published in the American Economic Review. Senator HATCH. My time is up. 

Ms. VALLAS. Senator, if I could just add a couple of notes. Is that 

all right? 

Senator HATCH. Sure. 

Ms. VALLAS. Thank you. I just wanted to point out a couple of 

things about the 1984 legislation that you referenced. I mean, first 

of all, it was the result of many years of careful study on a bipartisan basis and actually resulted—it was legislation that was 

passed unanimously and with great bipartisan support, and signed 

into law by President Reagan. 

Again, after years of careful study and examination of what the 

correct procedures and policies should be, it did not change the definition of disability in the statute. But what it did do, parts of 

which Marianna referenced, was to direct SSA to update its mental 

listings so that it would bring them in line with what current practice was at the time, which was the updated diagnostic and statistical manual. 

Secondly, it clarified the way that pain was evaluated to ensure 

that allegations of pain would only be considered in the presence 

of a medically determinable impairment that could reasonably be 

expected to cause the pain. 

Thirdly, it directed—and this was important, and I think especially in light of the chairman’s story of Stephanie Dempsey—SSA 

to consider the combined effect of multiple impairments. Previously, if you had multiple significant impairments but none on its 

own rose to the level of the statutory definition of disability, you 

would be denied benefits. This corrected that and updated it. 

18 

The CHAIRMAN. Thank you very much. I just have to get my colleagues into this. 

Senator Stabenow? 

Senator STABENOW. Thank you very much, Mr. Chairman, for 

this very important hearing. I first just have to say, as somebody 

who has spent a great deal of my adult life fighting for mental 

health parity, that I have a difficult time with this discussion, because I think it is a good thing that we are now treating serious 

disabilities above the neck, as well as those below the neck. 

I am pleased, Mr. Goss, to see, based on the numbers, we have 

not seen things change overall. But, Mr. Chairman, as I know you 

know, there are serious disabilities in the brain as well as every 

other organ in the body. 

But let me back up, if I might. I do have a question, but I do 

want to start by saying, Mr. Chairman, that, first of all, I think 

Social Security is a great American success story. We all think of 

it as retirement, and yet we also know it is a survivor benefit. 

I know colleagues here who have talked about the fact that, for 

them, the working parent passed away before their 18th birthday, 

and their family literally survived on Social Security. We also 

know, although we do not think about it, those of us who are fortunate enough not to find ourselves in a serious injury, this is a disability policy. So this is a great American success story. It is about 

security, and it is about insurance, and it is about all paying in. 

I am also, Mr. Chairman, not surprised, if we are looking at 

numbers between 1970 and 2012, that we are seeing costs change. 

Health care has changed, research has changed. We now spend 1 

out of 5 Medicare dollars on Alzheimer’s because, as we are living 

longer and getting older, those costs are going up—for SSI Disability as well. I am not surprised at that, since we are living 

longer, and we are seeing more things. 

VA—the blessing is that more people are surviving war. The 

challenge is that we have more costs, because we have long-term 

disabilities for people. So this is not a surprise to me. I would hope 

that we would not make this a political issue in the long run. We 

have, in fact, reallocated 11 times between the 3 pots. 

This is about adjustments between the three pots of Social Security, and it ought to be a no-brainer just to do this, in my judgment. I would hope that, in fact, that is what we would do. I also 

would hope that we would stop cutting the agency so that, in fact, 

you could continue to aggressively pursue the backlog, which I am 

very concerned about. 

Let me ask, Ms. LaCanfora, if you could talk a little bit more 

about the difficulty in qualifying for these benefits. More people in 

a recession applied? I am not surprised. People have no other income, so they say, ‘‘Maybe I will apply here.’’ It does not mean that 

the number of people who were qualified went up disproportionately because more people applied, but I do think that it is important to answer the comment that has been made several times by 

other distinguished panelists that it is the luck of the draw. Is this 

the luck of the draw? 

Ms. LACANFORA. No. Actually, I would say at the initial level, at 

the Disability Determination Services, we award 33 percent of applicants, which means that we deny two-thirds of them. Overall, we 

19 

allow less than half of all of the applicants who apply for SSDI, 

which means we deny more than half of them. 

So I think the criteria are strict. As Rebecca said, in comparison 

with other nations, we know it is very strict. Your impairment has 

to be expected to last 12 months or you have to be expected to die 

from the impairment. 

Another point, to reference the research that Dr. Burkhauser just 

referenced, where he mentioned that people who are denied benefits oftentimes earn more money than those who get on the rolls, 

that very research showed that the denied applicants earn, on average, $3,000 to $4,000 a year more than those who get the benefits. That is not a lot of money. 

That same research also showed that, of those denied applicants, 

half of them had zero earnings. So I do not think that denying applicants is necessarily the solution here. What we would like to see 

is more emphasis put on research and demonstration, because everybody agrees that individuals with disabilities, many of them 

want to work. 

We have to figure out, in a coordinated way at the Federal, 

State, and local levels, in conjunction with the private sector, how 

we provide the necessary supports for them to be able to do that. 

Senator STABENOW. Thank you very much. 

Ms. Vallas, could you talk a little bit more about what Social Security Disability Insurance means to the average worker and what 

options people would have if we did not have the disability program? 

Ms. VALLAS. Thank you for the question, Senator. I think, to the 

average worker, what Disability Insurance really means is peace of 

mind. It means that they know that in case—and, as you said, 

hopefully this does not happen—but in the event of a significant 

and life-changing disability or illness, they have the protection that 

they and their family will be able to stay afloat and make ends 

meet. That is really significant. I mean, it really, I think, symbolizes what makes Social Security, as you said, such a great success 

story. 

As far as what kinds of alternatives people would have, I think, 

sadly for most, there really are few alternatives. As I noted in my 

opening statement, very, very few American workers have access to 

employer-provided long-term disability insurance, and even for 

those who are fortunate enough to have that coverage, those plans 

are typically far less adequate than what Social Security provides. 

So the realistic alternative for many people, if they did not have 

DI, would be nothing, would be homelessness, would be skipping 

meals, would be not being able to afford needed co-pays on lifesustaining medications, really horrific things to envision. That is 

why I think DI is such an important program, and I am really glad 

we are all having a conversation today about how to strengthen it 

for those beneficiaries for whom it is really a lifeline. 

Senator STABENOW. So, if someone was not paying into this insurance system called Social Security and then being able to get 

the benefit from disability, chances are we as taxpayers would be 

paying a cost in another way for those individuals with no income 

who would find themselves in other places, other public assistance 

programs. 

20 

Ms. VALLAS. That is very possible. 

Senator STABENOW. So this is an insurance system. 

Mr. Goss, just to take 1 quick second about the demographics 

again, in terms of the changes, the number of people who qualify— 

if you might, just speak a little bit more again to the demographic 

changes. 

Mr. GOSS. Thank you very much. I think statistics can tell us 

lots of things, but we have to take care in the statistics we are 

looking at. What I presented here mainly, and many other people 

have talked about, is the increase in the number of disabled worker 

beneficiaries. That is largely—I think even Dr. Burkhauser would 

agree—the result of the increasing general population at working 

ages and the age distribution. 

Now, we can look at statistics in a different way. We can look 

at the percentage of the working-age population that is getting benefits. That takes away the increase in the population. We can look 

at the percentage of the population receiving benefits by age. That 

takes away the effects of the age distribution change. We can also 

look at the percentage of the insured population at each age. That 

takes away all three of the effects. 

Now, if you look at it that way, then of course the share of the 

increase that is due to increase in population, increase in insured 

status, and the changing age distribution is zero, because you have 

come up with a statistic that ignores this. So I think we just have 

to be very careful when comparing prevalence rates to increases in 

numbers. 

But, if I might say one other thing, we have heard mentioned 

several times, and I think you mentioned it also, the luck of the 

draw. If I may, I think Dr. Burkhauser mentioned several times, 

he referred to a paper by Nicole Maestas in American Economic Review in 2013. It happens that that paper was reviewed. I reviewed 

it back in 2012 before it came out. 

In fact, Dr. Burkhauser and I even talked about the 23 percent 

statistic that was mentioned in that. Let me share with you what 

that 23 percent statistic actually is. That 23 percent statistic was 

a matter of the researchers looking at a range of different Disability Determination Service examiners, individual examiners, and 

looking at their personal, individual rates of allowance, including 

the allowance rates that come from appeals afterwards. 

The very highest and the very lowest allowance rates for the two 

individuals were 23 percentage points apart. Now, Nicole Maestas 

and I talked quite a bit about this. If you would look at her paper 

actually in the American Economic Review, wonderfully, she put a 

footnote in about the 23 percent and modified it along the ways 

that we had discussed. One way was to say, eliminate the top 1 

percent and the bottom 1 percent, and the 23 percent shrinks to 

11 percent. 

The CHAIRMAN. Mr. Goss, respectfully, Senator Brown has been 

incredibly patient. 

Mr. GOSS. I apologize. 

Senator BROWN. I will listen to Mr. Goss all day. I have had him 

in my office, and I like listening to him, Mr. Chairman—— 

Senator STABENOW. Would you like to ask him to continue his 

discussion? 

21 

Senator BROWN [continuing]. But I appreciate the time. 

The CHAIRMAN. I thought Dr. Burkhauser wanted to continue 

this. We are going to have a second round, because our colleagues 

do feel very strongly about it. So we can continue on this question 

of the paper and the 23 percent. 

We will now go to Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. It is an honor to be 

on this committee and to work on issues that matter to so many 

people’s lives like this. I have been in the Senate only 71⁄2 years. 

I have learned a number of things. One of them is, when I hear 

some of my colleagues talk about strengthening and improving a 

program like social insurance, I always listen with caution. 

I noticed in the Wall Street Journal a Republican aide was 

quoted about this hearing, saying, ‘‘Senator Hatch hopes to focus 

on the disability issue to catalyze a broader discussion.’’ I think 

‘‘broader discussion,’’ to me, means discussions of Social Security at 

large, discussions of Medicare, discussions of social insurance overall. 

I think we always need to approach this with caution, and I caution also putting it in historical context. I carry this letter around 

that was given to me by someone in my office. Her father—she is 

roughly my age, without giving away anybody’s age—found this letter in her grandfather’s—her father is 88. He found this letter sent 

to her grandfather from the Pennsylvania Gas and Electric Company dated December 24, 1936. 

So this was a letter written by the vice president of this company 

in 1936 to one of his employees, adequately, not well-paid, but getting along. He writes, ‘‘Dear Fellow Employee: On August 14, 1935, 

Congress passed the Social Security Act,’’ something probably few 

of these employees had ever really much heard of in 1936. ‘‘Under 

a provision of this Act, the company is required to deduct 1 percent 

of your wage beginning next week, and then 1.5 percent to 2.5 percent, then 3 percent. These deductions are designed to provide for 

retirement at age 65.’’ 

So you get this letter from your boss, you do not really know 

what Social Security is, and they are saying, we are going to take 

3 percent of your wages and we are going to give it back to you, 

and maybe some more, at age 65. It occurs to you, wait a minute, 

nobody in my family has even lived to 65 in the last couple of generations. So this stuff is not easy. There are always misconceptions—the same with Medicare, the same with the Affordable Care 

Act. 

Why this concerns me is, there was a recent poll that showed 72 

percent of Republicans, 64 percent of conservatives, agree with the 

statement, the Affordable Care Act has helped no one, no one, zero, 

no one. In another recent poll, 23 percent of all Americans believe 

Barack Obama is not an American, and another 17 percent are not 

sure. 

So, when I hear these attacks on Social Security Disability Insurance—there is sort of the ‘‘good’’ Social Security. That is what Congressmen’s mothers and fathers get. That is the ‘‘good’’ Social Security. Then there is Social Security Disability, which is a bunch of 

people who do not want to work, or they are people of color, or they 

22 

are mostly women, or they are low-income people and they are 

scamming. 

I mean, we hear these stories. When any of us contribute to 

these kinds of beliefs, these kinds of doubts, we know how hard it 

is to enact and run these social programs. Everybody loves Social 

Security. Now, the only way to really attack Social Security is to 

go in the back door through Disability Insurance, because that is 

not my mom and dad getting Social Security, that is those other 

people. 

That is why these hearings are so important and why telling the 

truth at these hearings is important and not using one story to besmirch the reputation of the whole program with millions of people, 

85 million Americans. Six-point-five million Americans used the VA 

last year, a total of 85 million patient visits. There were problems 

there, serious problems. 

But you know, most people get pretty good care from these government programs, whether it is Social Security Disability, whether it is any kind of social insurance. That is just a cautionary note 

that I would like to share with my colleagues, and I hope that we 

can keep this sort of on the straight and narrow and not use this 

to discredit something beyond what its intents are. 

So my question, starting with Ms. Vallas—and maybe any of you 

can chime in too—these stories are about, as you said so well, Ms. 

Vallas, individual people with real names, real problems, and real 

concerns. Lincoln used to say, when his staff would say, you have 

to stay in the White House and win the war, you have to free the 

slaves, you have to preserve the Union, he would say, no, I have 

to get my public opinion back. He understood it is real people out 

there who are affected by real decisions. 

Mike from Cincinnati, OH owned a small construction business. 

At 60, he suffered a massive stroke. This was even more serious 

than if he fell off a ladder. He suffered a massive stroke that left 

him paralyzed, unable to speak over the past 7 years. Mike is now 

67. His medical expenses depleted his IRA. He had prepared for 

the future as well as any small businessman could. If he did not 

have SSDI, his family does not know what he would have done. 

Are benefits for people like him adequate, are they too generous? 

What are they? 

Ms. VALLAS. Thank you for the question, Senator. I think we 

have all talked about how important this program is, and it is really nothing short of vital for beneficiaries. But benefits are incredibly, incredibly modest. As the chairman noted, they are just over $1,100 per month, which breaks down to about $300 a week. So, at a level that is so 

low, and when we know that eight in 10 beneficiaries count on DI 

for their sole or primary source of income and fully one-third count 

on it as their only source of income, it really is no surprise that 

one in five beneficiaries lives in poverty, even with the vital assistance from those benefits. 

So when you ask, are they adequate, I mean, they are incredibly 

vital, but I think that there would be room for having a conversation about strengthening the benefits that people count on and that 

are so important to them so that we can provide people insurance 

so that they would not be living in poverty if something happens 

23 

to them, but rather would be able to be above the Federal poverty 

level. 

Senator BROWN. Dr. Burkhauser, too adequate, too generous? 

Dr. BURKHAUSER. Well, I guess what I would say is, for people 

who are able to work, I would much prefer to put my money in accommodation and rehabilitation to slow their movement onto the 

rolls. I think that is the major issue. As a government, what are 

we going to do to try to keep people in work as long as possible? 

These are very tough issues. 

Sweden, Great Britain, and Holland, over the last 15 years, have 

radically changed their approach to the population with disabilities 

by putting more energy into accommodation and rehabilitation 

rather than into benefits on the rolls. Because of that, those—— 

Senator BROWN. Do you want to expand the Earned Income Tax 

Credit then, because that incents people to work? 

Dr. BURKHAUSER. That would be a wonderful idea. The 1996 welfare reform under President Clinton demonstrated that when you 

made work pay for single moms, you dramatically changed the way 

that single moms led their lives and tremendously increased their 

workforce employment. 

I would love to see a disability worker’s tax credit for kids 18 to 

25, for instance. This is an age group not now eligible for the 

Earned Income Tax Credit. This kind of a disability tax credit 

could allow them the opportunity, even if they could only work 

part-time, to still have sufficient income so that they could make 

more than they would on SSDI. These are the kinds of innovative 

ideas that I hope we can talk about. That would be great. 

The CHAIRMAN. Let us do this. We are going to continue this, I 

know, on a second round. 

Senator Nelson? 

Senator NELSON. Just to put it into perspective for me, there are 

650,000 Floridians receiving disability benefits. It is about 6.2 percent of all Florida residents between the ages of 18 and 64, so it 

is substantial. Yet, if we do not act, those benefits are going to be 

cut. So, Ms. Vallas, what would their life look like if they saw a 

20-percent reduction in their monthly checks? 

Ms. VALLAS. Thank you for the question, Senator. As I pointed 

out in my response to your colleague Senator Brown, the benefits 

are already incredibly modest, and many beneficiaries are already 

living in poverty, so there really is no room in their household 

budgets for cuts. Many are already making tough choices between, 

do I pay my gas bill or do I pay my electric? Do I take half a pill 

so that I can afford transportation to go to see a doctor? If those 

are the choices that they are already making, a 20-percent benefit 

cut would be nothing short of devastating for folks who are already 

struggling to get by with these vital, but modest, benefits. 

Senator NELSON. Let me ask Mr. Goss and Ms. LaCanfora, we 

do not hear a lot about how the rate of awards has remained relatively flat for disability, and we have seen a number of people rejected over the last few years. What does this say about the strict 

eligibility standards? 

Mr. GOSS. If I could just start on that. What we have seen overall for about the last 20 or 30 years is that the rate of award has 

remained quite constant; that is, of the percentage of people who 

24 

apply. That has remained quite constant. That does vary somewhat, as we have discussed so far today, with the state of the economy. When we have a very, very weak economy and more people 

apply, we have a lower award rate. 

But another way of looking at this too is the disability incidence 

rate, which is the share of the number of people who are living in 

our society and are insured, actually receiving benefits. That, for 

men—it goes up and down, as everything does—but that has remained quite constant for men over time. 

That has increased somewhat, we must tell you, for women at exactly the same time over the last 30 to 40 years, so that we have 

doubled the share of women who in fact are insured for disability 

benefits. So we have gone from 35 to 70 percent of women in our 

workforce having enough recent work to be insured for disability 

benefits, and over that same time the disability incidence rates for 

women have gone up. There is a relationship there, clearly, but we 

just want to make sure that we are clear that incidence rates have 

gone up somewhat, but it is highly associated with the share of 

women who are insured. 

Senator NELSON. Well, what do you think, Ms. LaCanfora, about 

the strict eligibility standards? 

Ms. LACANFORA. I would add only, to reinforce the point I made 

earlier, that the requirements are very strict. Less than half of all 

applicants are awarded benefits overall after exhausting all of their 

appeals. In order to qualify for benefits, the disability must last a 

minimum of 12 months or be expected to result in death. We see, 

as Ms. Vallas said, I think, one in five men and one in seven 

women dying within 5 years of getting disability benefits. 

The only other thing I would like to mention is that, from a quality review perspective, we have very robust quality review at Social 

Security, which we are always enhancing. At the Disability Determination Services where we make our initial and reconsideration 

determinations, our quality is consistently above 99 percent, so we 

think we are also making accurate and consistent decisions—always with room for improvement, of course, but we are pretty good 

at what we do. 

Senator NELSON. Thank you, Mr. Chairman. 

The CHAIRMAN. Let us stay with Mr. Goss on this matter of 

women, because of course this has been a very significant aspect 

of the growth. As you said, it was foreseen, expected, and now it 

is predicted. 

Let us talk a bit about how SSDI and the challenges with respect 

to women in the workforce continue to play out in this debate. It 

seems to me that, in many instances, we know that the incomes 

of women are lower, so then they would have a lower benefit. 

Then they would, in many instances, take time out to raise children, care for an older parent. What are the implications of these 

kinds of trends, and do you think that this is an important challenge for us—again, we are going to try to work in a bipartisan 

way—and what might Congress do about that? 

Mr. GOSS. Senator Wyden, that is an extremely, extremely good 

question and a great insight. I think, first, I would speak to the 

success story that we have had as a society where women—look at 

the panel today, look at this room. 

25 

Women are much, much more engaged in the workforce and on 

a consistent basis, and that is why, at this point, we now have essentially the same percentage of women of working age who are insured for disability as for men. That is a great success story. 

You are exactly right though, that women are much, much more 

likely—and I am probably not the best person to speak to this— 

to take time out during their working years to care for children or 

care for elders. That has a direct impact on the average earnings 

level the person has that we use for determining benefit levels and 

will, therefore, of course, lower the benefit level available to 

women. With more and more women working in single-parent 

households, that becomes much, much more important than when 

we were a society that was much more likely to have two-parent 

households. 

The CHAIRMAN. Does any other panelist want to comment on 

that? 

Ms. VALLAS. I would be happy to chime in, Mr. Chairman, since 

it is such an important topic, and I am really glad that you brought 

up the importance of DI to women. As you noted, DI amounts are 

actually lower for women typically than they are for men, and so 

it is no surprise that one in four women DI beneficiaries lives in 

poverty compared with just one in six men, and that is because of, 

as Chief Actuary Goss noted, time out to care for children and for 

other reasons, and also lower lifetime earnings. 

Women are actually slightly more likely to become disabled than 

men are and to face chronic illness, and that is actually consistent 

across the U.S., as well as other nations. But, given that women 

on average have lower earnings and higher rates of poverty, DI is 

especially important for women. 

Both lower earnings and higher rates of poverty are actually 

themselves risk factors for chronic illness and for disability, and 

they can also leave individuals with less to fall back on in the 

event of a significant disability or illness. So, DI is especially important for women. 

The CHAIRMAN. Do any other panelists want to comment on that? 

I want to let my colleagues have a second round. The only thing 

I want to do is make two comments. Maybe for the record, Mr. 

Goss, we can have you respond to the comments that Dr. Burkhauser made with respect to his judgments about the accuracy of 

some of your projections and whether the growth rate is understated. I think that would be helpful to have for the record. We 

could probably go on all morning with the battle of the actuaries, 

both of whom have very distinguished credentials. 

I also would like—and we can do this off-line—to follow up on 

that last question that Senator Brown asked you, Dr. Burkhauser. 

Senator Brown has been a great champion of the Earned Income 

Tax Credit, which I have been a very, very strong supporter of as 

well. This will be a major issue as we go forward. Senator Hatch 

and I talked about bipartisan tax reform. 

Senator Brown asked you about supporting the Earned Income 

Tax Credit, and you said you did and made a comment with respect 

to disability. So I am interested in hearing more about the details 

of what the two of you were talking about in that last question 

Senator Brown asked. He has been a great champion of the Earned 

26 

Income Tax Credit, and I am very much in support of what he is 

working on. 

Senator Hatch? 

Senator HATCH. Well, I do not know anybody who wants to hurt 

anybody who has a legitimate disability claim, but we also have a 

$17 trillion, going on $18 trillion national debt. We also have an 

inability to raise more funds. We also have all kinds of other impingements on the Federal budget. 

So naturally, part of the reason for this hearing is to see if there 

is some way we can resolve this problem and yet not hurt anybody. 

So anybody who is taking the position that, oh well, the Republicans are just against Social Security, I mean, that is a really, 

really offensive thing. 

But it does concern me that the CBO—I mentioned it in my 

opening remarks—says the number of DI beneficiaries increased 

nearly 6-fold between 1970 and 2012. Now, there may be a lot of 

really good answers to that. You have tried to answer that, Mr. 

Goss. Over the past 40 years or so, outlays for benefits have grown 

by more than 9 times. 

Now, sooner or later we wonderful people here in Congress are going to have to look at that $18 trillion debt and find some way 

of making payments that are just, reasonable, and decent and get 

rid of any kind of misspent payments. We have plenty of those 

throughout the Federal Government. So I am just concerned. Who 

wants to hurt anybody on Social Security? I do not. 

But I would like to direct this question to Dr. Burkhauser, and 

Ms. Vallas as well. In your testimony, Ms. Vallas, you discussed 

the U.S. DI program in relation to other OECD countries and identified some quotes from OECD reports saying that, by some measure, U.S. eligibility criteria are stringent. 

Yet, as I understand experiences of the other OECD countries, 

many have been confronting rapid growth rates in their disability 

programs by increasing the stringency of their eligibility criteria 

and changing policy to try to accommodate, where possible, the 

abilities of disabled workers to participate in whatever gainful activity that they are able to perform. They are having problems like 

we are, it seems to me. 

So let me start with Ms. Vallas to see what your thoughts are 

about recent international experiences with disability programs, 

followed by whatever observations you would like to bring out here, 

Dr. Burkhauser. Help us to understand this. Help us to know how 

to solve this problem. Not just, we need more money, which is the 

request of everybody in the bureaucracy today, because we do not 

have more money to give. 

So, how do we do that? I wish our friends on the liberal side 

would find some ways of cutting out the unessential programs in 

government so that we can do a better job for you. But I would like 

to have that answered. 

Ms. VALLAS. Thank you for the question, Senator. There is definitely a lot of attention that is being paid to what is happening 

overseas, and I think there have been a lot of questions raised 

about whether what we are seeing in the Netherlands, which Dr. 

Burkhauser often refers to, or in other nations, might serve as a 

reform model for the United States. 

27 

Senator HATCH. Yes. 

Ms. VALLAS. I would note that, even after reforms that we have 

seen in the Netherlands, the U.K., and elsewhere, the United 

States actually still has the lowest disability recipiency rates measured as a share of the working-age population, and we also spend 

comparatively little compared to those other countries, even after 

their massive disability benefit reforms. 

So I think the U.S. already has a disability income support system which, as we have said, has one of the strictest disability 

standards and least generous benefit structures in the industrialized world. So to look to other countries which started with much 

more lax disability benefit definitions and much more generous 

benefits, they have effectively engaged in massive reform to try to 

get closer to where we are, yet, we are still actually doing better 

on those measures in terms of spending less and having a smaller 

share of our population receiving benefits. So, for those reasons, I 

think they might actually be better served looking to us as a reform model than vice versa. 

Senator HATCH. Dr. Burkhauser? 

Dr. BURKHAUSER. Well, no one can accuse Sweden and Great 

Britain and the Netherlands of being conservative governments 

that do not use government funding to provide for their folks with 

disabilities. But over the last decade, major changes have occurred 

in the Dutch system, in the Swedish system, and in the British system that have substantially reduced the prevalence rate of people 

in their working-age population receiving disability benefits. 

They did not do it primarily by moving people off the rolls; they 

did it by slowing the movement onto the rolls of these folks by providing accommodation, rehabilitation, and incentives for private 

corporations to provide these kinds of help so that they had a workfirst environment. 

The problem with Social Security Disability Insurance is that it 

is a pure transfer program. The Social Security Administration is 

great at keeping records and paying people benefits. It is not in a 

position to provide accommodation and rehabilitation as an alternative. So we should look to what, for instance, the Dutch have 

done. 

The Dutch have said that, for the first 2 years, private corporations are required to take care of the long-term disability needs of 

their workers. Thereafter, if any of their workers come onto the 

rolls, their experience-rated taxes go up in the way that we do in 

the United States with State Worker’s Compensation programs. 

These reforms have essentially given the responsibility to private 

corporations to provide the kind of necessary accommodation or rehabilitation that will slow people coming onto the rolls. For corporations that do that, they pay less in payroll taxes than the firms 

that do not do it. These kinds of incentives, I think, are structural 

changes that we should think about in reforming our DI program. 

They will make all people with disabilities better off. 

Ms. VALLAS. Senator, if I could add just one more note. 

Senator HATCH. Sure. 

Ms. VALLAS. One of the proposals that has been floated—the 

source being countries such as the Netherlands, and Dr. BurkVerDate Mar 15 2010 14:11 Feb 13, 2015 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 R:\DOCS\92646.000 TIMD
28 

hauser has voiced support for this proposal—is to experience-rate 

disability insurance here in the United States. 

I think it is worth being very careful as we explore that sort of 

option, given that if our shared goal here, as it seems everyone in 

this room agrees, is to best support workers with disabilities as 

well as we possibly can, experience-rating would be very likely to 

have the effect of actually providing employers with a disincentive 

to hire workers with disabilities. That is something we should be 

very cautious about as we consider potential reform. 

Senator HATCH. All right. My time is up. 

The CHAIRMAN. Colleagues, Senator Hatch and I have each had 

two rounds. Senator Cardin has not had his first, and Senator 

Brown would like to ask some additional questions. So let us recognize Senator Cardin. He has a hectic schedule today, and we are 

happy he is here. 

Senator CARDIN. Well, thanks for acknowledging my schedule. I 

appreciate that, Senator Wyden. Senator Brown was not happy 

that I showed up when I did, but thank you for being pleased. Let 

me thank all the witnesses. I was following some of your testimonies, and I do apologize for not being here. The Senate Foreign 

Relations Committee is holding hearings on Iraq, which is urgent 

today. 

I really appreciate this hearing, because I think it is critically 

important that members of the Senate and the public fully understand why we are having an issue with the DI trust fund, the different rates that go into the OASI and the DI trust funds, the demographic changes that have taken place in our country, and the 

changes in the law that increase the age of eligibility for Social Security retiree benefits. 

It is not unusual to see an imbalance between the two funds. It 

is my understanding that the last time this imbalance occurred and 

this Congress took action was 1994. If I am correct, I believe it was 

unanimous action in both the House and Senate. I see everybody 

nodding. Shaking heads do not get into the record, so ‘‘yes’’? 

Ms. VALLAS. Yes, Senator. 

Senator CARDIN. Thank you. Thank you for pointing that out. So 

it was not a controversial issue. If I am also correct, I believe that, 

before the 1983 changes, the amount of funds going into Disability 

Insurance was much higher than it is today. So we reduced the 

amount going into the Disability Insurance trust fund when we 

made the 1983 reforms, recognizing we did not need as much in the 

fund at that time. Again, you are shaking your heads. 

Ms. VALLAS. Yes, Senator. 

Senator CARDIN. I just want to make sure the record is correct 

on all these issues. 

Senator Wyden, your opening comments are so correct—Disability Insurance is critically important to the people of this country. I could tell you about people in my State who depend upon Disability Insurance. Our office has helped many people go through 

the system, trying to make it as easy as possible for people who 

deserve to be on the program to receive benefits. Senator Hatch, I 

agree we have to make sure the integrity of the programs is maintained. That is absolutely essential, and I fully support that. 

29 

But I really want to emphasize that the imbalance between the 

two trust funds is not unusual. I hope Congress will do everything 

we can to protect the integrity of the system and ensure that those 

who are entitled to benefits receive them in a timely way. We 

should also look at any outliers in the system to see whether they 

are appropriate. 

But at the end of the day, we, on a non-partisan and non-political 

basis, recognize that contributions have been adjusted between the 

two trust funds to make sure that both programs are adequately 

protected and that we have adequate revenues in the funds to last 

us for some time. So it is reasonable to look at an adjustment. 

I will make one last point. Back in 1994 and 1995, the President, 

in his budgets, submitted adjustments. We do not have OMB here 

today, but I would welcome their thoughts as to whether they support in their budget for next year an adjustment between the two 

trust funds. 

Ms. LACANFORA. Yes. I am actually the Assistant Deputy Commissioner, actually the Acting Deputy Commissioner for Policy at 

Social Security, so I can say that the administration and the Social 

Security Administration do support reallocation. 

Senator CARDIN. Oh, good. Well then, put it in the budget. Get 

it to OMB so that we have that direct request: what number you 

want to see adjusted, how you want to see it adjusted. I think it 

would be important to have leadership from OMB, and then, Senator Wyden and Senator Hatch, we would have better information 

on the long-term impact that reallocation would have on the trust 

funds. 

I think this hearing has been very helpful in putting this issue 

in perspective for us. There is no reason to panic. We always want 

to do a better job in the way we manage the trust funds, but I 

would hope that we would have guidance as to how we can make 

sure there is no anxiety in 2016 that we would not be able to pay 

full benefits under the Disability Insurance program. 

With that, Mr. Chairman, I thank you for the time. 

Mr. GOSS. Senator Cardin, might I just add that I am the Chief 

Actuary at Social Security, and we do, at the conclusion of every 

Trustees’ report, produce a memo, at request, of what kind of reallocation potentially could be done to do just what you said, to 

equalize the trust funds. We have one of those now. It would be 

a temporary reallocation just for about 10 years of, at most, having 

0.1 percent of the overall payroll tax rate shifted from OASI to DI 

for a brief period of time. 

And I might just add, if you wanted to completely fix the 75-year 

projected shortfall for DI, we estimate that to be 0.32 percent of 

our tax base. So, if the payroll tax of 6.2 percent were increased 

by 0.16 percent for employers and employees each, that would 

eradicate the shortfall over the next 75 years. I am not suggesting 

that that is something that you want to do or that the American 

people would want, I just wanted to sort of put that in perspective. 

Senator CARDIN. I appreciate that. Mr. Chairman, just very briefly, my point was that we normally adjust the existing revenues in 

order to make sure that we do not run out of funds with one trust 

fund versus the other. The overall solvency of the Social Security 

30 

system, including the Disability Insurance program, is something 

I know this committee is very interested in. 

Mr. GOSS. Our current projection is 2016 reserve depletion for 

DI, 2035 for OASI. They could be equalized at 2033 with a reallocation. 

The CHAIRMAN. For our guests, I will tell you, Senator Cardin is 

always worth waiting for, and you have heard it again. [Laughter.] 

Senator Brown? 

Senator BROWN. I was thinking the same thing, Mr. Chairman. 

Thanks. 

I want to follow up on Senator Cardin’s comments and questions 

about how—and we talk about this around here all the time—we 

need a more predictable tax system, we need a more predictable set 

of rules. You know the anxiety as we move up close to a debt ceiling, or the anxiety of a reauthorization of a program and how important predictability is. 

So just to expand a bit on that, Ms. Vallas, if you would sort of 

help us with this. How does reallocation actually work? We have 

done it, as Senator Cardin said and as you said in your testimony, 

a number of times. We know there is precedent. Does it cost anything? Is there any alternative? If you would, walk us through exactly how it has happened in the past and how it could happen now 

so we can reach some consensus, as we used to, so we could do this 

quickly. 

Ms. VALLAS. Thank you for the question, Senator. As was pointed 

out very well by Senator Cardin, this has been really the traditional non-controversial and routine step that Congress has taken 

11 times in the program’s history since 1957. It has gone actually 

both ways. About half the time OASI has been the fund that has 

needed to have funds shifted towards it, and about half the time 

it has been DI. So really, as Senator Cardin said, the two have sort 

of always been considered together, and there have been reallocations made whenever needed, and on a bipartisan basis on every 

occasion. 

The way it works is, I like to think of it as though there is a 

spigot of water coming down out of the ceiling and there are two 

buckets. One of them is a much larger bucket, that is the OASI 

bucket, and most of the water is going into that bucket. The other 

bucket, a much smaller bucket, is the DI bucket, and a little trickle 

of water is going into that one. 

What reallocation does is, it actually shifts where the water is 

going so that slightly more goes into one or the other fund depending on its needs. So the plan that the Chief Actuary has laid out 

in the trustees’ report and in a memo is a hypothetical plan for 

how you shift the water coming into those buckets. 

Senator BROWN. If the water represents cost, there is no additional cost. 

Ms. VALLAS. That is exactly right. There would be no need for 

additional taxes, there would be no need for—— 

Senator BROWN. And this is no surprise that this is happening. 

Again, we knew this was about to happen at some point in the future, correct? 

Ms. VALLAS. That is exactly right. We knew back in 1995 that 

we were going to be where we are today, here today talking about 

31 

2016. So actually the program has been on a tremendously predictable path since the last time reallocation happened in 1994. 

If I might, I just wanted to expand on a point that Senator 

Cardin raised, which is a very important one, which is kind of taking a walk back in history. If you look back at 1983 to that package 

of reforms that the Senator mentioned, one of the consequences of 

that package of reforms was actually a significant loss to DI because DI’s share of the payroll taxes, the water trickling into that 

bucket, was significantly cut. 

If DI’s share of payroll taxes had actually continued to rise as 

scheduled under law previous to 1983, we would not be having this 

conversation today. DI would not be in need of shoring up. The 

1994 reallocation partially addressed that long-term under-funding 

of DI, but it did not fully correct the under-funding that had happened since 1983. So what we really need to do is sort of finish the 

job that the 1994 reallocation started. 

Senator BROWN. Thank you, Ms. Vallas. Let me shift to another 

question for you. We all talk here about how we want people to 

work, we want to reward work in this society. I appreciate Dr. 

Burkhauser’s support of the Earned Income Tax Credit; that is one 

of the ways we do it. But there seems to be a myth that Disability 

Insurance is the cause of otherwise healthy workers leaving the 

workforce. Explain, Ms. Vallas and anyone else who wants to take 

it, how Disability Insurance serves actually as a work incentive. 

Ms. VALLAS. Thank you for the question. The DI program actually contains an array of strong work incentives and protections for 

beneficiaries if their conditions improve and they are able to attempt to return to work. 

So actually, given those significant work incentives, which include beneficiaries being encouraged to work up to the substantial 

gainful activity level to supplement their benefits—that is up to 

about $1,070 per month—they are encouraged to do that. They are 

also encouraged to take advantage of a trial work period which 

fully protects their benefits but which allows them to attempt to return to work to see if that is going to be feasible given their health. 

Given those strong work incentives, one would expect that, if 

beneficiaries had significant work capacity, we would be seeing a 

lot of them taking advantage of these strong work incentives. We 

would expect that a lot of them would actually be supplementing 

their meager earnings so that they would have a little more to get 

by on each month, but that is actually not what we see. As 

Marianna noted, what we see is actually very few beneficiaries 

with sufficient work capacity to have any earnings at all. 

Actually, Marianna noted, I think, something that I will repeat, 

because I think it bears repeating. If you actually look at the applicants who were denied benefits—so people who were found not disabled enough to reach that strict disability standard—we see incredibly little work by them after the denial. So, I think that really 

underscores how strict the disability standard is. 

Senator BROWN. I have one related question, and you can finish, 

if the chairman is all right with that. These people working who 

are getting disability, they are paying into Unemployment Insurance, right? 

Ms. VALLAS. That is right, Senator. 

32 

Senator BROWN. All right. Yes, if you would like to comment on 

that question, if that is all right, Mr. Chairman—— 

Ms. LACANFORA. I was just going to add—oh, I am sorry. 

Senator BROWN. Is it all right for her to comment too? 

The CHAIRMAN. Yes. 

Senator BROWN. All right. Thank you. 

Ms. LACANFORA. I just wanted to add to what Ms. Vallas said 

by pointing out that I think there is some common ground here in 

terms of a path forward. One of the things that Dr. Burkhauser 

mentioned was slowing the entrance of individuals onto the rolls, 

and another way to look at that is with what we call early intervention. I think that we are very interested in exploring the idea 

of early intervention. 

How do you help people who have a desire to work despite their 

disability, to do that in a way that works for them? There are three 

proposals in the President’s fiscal 2015 budget, demonstration projects that we would like to get the funding to run, that would do 

exactly that, that would explore ways to incentivize individuals 

with disabilities to work, to stay in the workforce, before they come 

on the disability rolls. 

One of them includes, for example, looking at individuals who 

have been denied benefits. What happens to those folks? How can 

we keep them working so that they do not end up deteriorating further and having to come back and apply for Social Security again? 

We would also like to look at tax incentives for employers and test 

how that might work and what that might look like. 

Lastly, we would like to also look at people who could use vocational and other rehabilitation supports, and coordinate with States 

to see what State services might help people with disabilities return to work. 

So I would just like to reiterate that I think we have some common ground with respect to exploring early intervention strategies 

to help people return to work, and that will have, likely, the collateral benefit of slowing some of the growth in the rolls. 

The CHAIRMAN. Senator Brown, does that respond to your question? 

Senator BROWN. Yes, I think so. I am done. 

Senator HATCH. But does Dr. Burkhauser have anything to add 

to that? Because I would be interested just to see what he has to 

say. 

Dr. BURKHAUSER. Yes. So to argue that the Social Security Disability Insurance system encourages work is just odd. It is true 

that, once you are on the disability program, that is, you have 

spent a year or two proving that you cannot work, then there is 

some opportunity to work at that point. 

But that clearly is the wrong moment to apply interventions to 

encourage work. What you really want to do is focus on slowing 

people down from leaving the workforce and moving onto the disability program in the first place. 

The CHAIRMAN. I am not sure you disagree with him much. Is 

that true? 

Ms. LACANFORA. Well, that is right. I am trying to point out 

some commonality here. Again, we have a proposal in the 2015 

budget to test those very early intervention strategies that would 

33 

keep people in the workforce before they come onto the disability 

rolls. 

The CHAIRMAN. Let us do this, because we have to wrap up. I 

was pleased, because I thought the two of you were moving together there. I always like to kind of quit while I am ahead. Senator Hatch and I were basketball players in our youth, and you 

would always like to make one shot before you left. I think the two 

of you were moving closer together on this early intervention point. 

Feel free to add additional materials for the record. 

I know that Senators on both sides of the aisle are going to have 

questions for all of you, and I am really very appreciative of the 

fact that you have allowed us, once again, to do what Senator 

Hatch and I feel so strongly about, and that is have big debates 

about important issues, and do it in a thoughtful way where people 

express themselves. 

I am still interested in seeing the back-and-forth, by the way, on 

the projections for the program between Dr. Burkhauser and Mr. 

Goss, and you will be getting questions from a number of our Senators. 

You heard me refer to Stephanie Dempsey, who sat where you 

are, Mr. Goss. She is, for me, the face of this program, a woman 

who did everything right who just got walloped by every possible 

illness, who takes 19 medications, all stacked up where Mr. Goss 

is. 

We can figure out a way, as Senator Cardin said, and I think 

very eloquently, to make sure that the safety net is in place for her 

and address program integrity, and we can do it in a bipartisan 

way. You have helped us with that. We are going to have plenty 

of questions for you in the days ahead. 

With that, the Finance Committee is adjourned. 

[Whereupon, at 11:54 a.m., the hearing was concluded.] 

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A P P E N D I X 

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